Labour sources set their sights on leading or controlling enough councils to take the leadership of the Welsh Local Government Association.

However, Labour was reported to have lost its leader in Rhondda Council Taf, Russell Roberts.

The Welsh Conservatives lost their majority in Monmouthshire, falling three seats short of the 22 they needed to secure outright control.

They also lost control of the Vale of Glamorgan, with Labour now the largest party but without an overall majority, and its leadership of Newport.

The Conservatives' leader in the Welsh assembly, Andrew RT Davies, said the Welsh Tories suffered a "setback" because of a "difficult national backdrop".

"The message need to be clearer, it needs to be crisper and people need to know that the job we are trying to undertake isn't something that can be done in the blink of an eyelid," he added.

"I think we have to see a setback, there's no doubt about that.

"Ultimately we tried to fight a local campaign but we have to accept it was a mid-term decision that most people took."

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The first full result announced in Wales was in Wrexham, where Labour made large gains

Welsh Lib Dem leader Kirsty Williams, whose party suffered heavy losses, said attention had been focused on Westminster politics and that voters had sent the UK government a message.

"I think it's clear that our colleagues in Westminster are taking some tough decisions and the benefits of those tough decisions are yet to be felt," she added.

Plaid Cymru had been playing down expectations of doing well under its new leader Leanne Wood, who was elected in March, saying the elections came too early in her tenure to be seen as a verdict on her.

Plaid had hoped to gain overall control in Gwynedd, one of its heartland areas, but fell one seat short.

Before the Gwynedd result was announced, Ms Wood said it was a difficult night and that it was now "time to rebuild".

Speaking to BBC Wales, Plaid AM for Mid and West Wales Simon Thomas said Ms Wood could not be blamed, insisting the party had enjoyed "some successes" but on the whole it had been "a disappointing night".

"But, to be fair, it's a bit like the weather itself, it's mostly drizzle with some outbursts of sunshine and we've got to look for the success I think we will have by the time all the votes are counted," he told BBC Wales.

Mr Thomas admitted Plaid had "tipped down" in Caerphilly after its leader, Allan Pritchard, was ousted and said the party was not as "rigorous or professional" on the ground as it needed to be.

Mr Hain's office would not be drawn on unconfirmed reports that he would quit after the election.

Asked if the Neath MP intended to stand down, a source close to him said: "Not straight away. We don't want to comment on what might happen when there's a reshuffle."

He added: "There's not going to be a reshuffle today or this weekend. All the reshuffle speculation is on Cameron."

Some authorities were not due to declare results until Friday afternoon.

Elections in Anglesey, where ministers have put commissioners in charge after years of political infighting, have been postponed until next year.